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Archive for Saturday, January 15, 2011

Kansas Legislature’s lack of funding hurts KPERS

Glenn Deck, executive director of the Kansas Public Employees Retirement System, talks about funding problems in the system and what the Legislature will be considering as ways to fix it. His comments came after a meeting of the House Pensions and Benefits Committee during the first week of the 2011 legislative session.

January 15, 2011

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— Years of under-funding Kansas’ public pension system need to be corrected soon, officials say.

“Current benefits are safe for a period of time, but we do have a significant long-term funding shortfall,” said Glenn Deck, executive director of the Kansas Public Employees Retirement System.

KPERS projects a $7.7 billion gap between long-term revenues and commitments for paying pensions.

Nearly all state, school district, county and city employees in Kansas are part of KPERS. Some 260,000 Kansans are paying into the system or drawing out retirement benefits. KPERS pays out more than $1 billion in benefits per year.

But the state has not been contributing at the rate it needs to keep KPERS properly financed.

Combine that with devastating investment losses in the stock market during the recession, and KPERS needs help.

“That’s sort of the peanut,” said Julian Efird, of the Kansas Legislative Research Department. “There have been systematic under-contributions and there have been periods of significant market losses,” he told members of the House Pensions and Benefits Committee last week.

Deck is quick to note there is no immediate problem in paying out benefits, but adds, “The longer we keep pushing it off, the price gets bigger.”

State Rep. Mitch Holmes, R-St. John, and chairman of the Pensions and Benefits Committee, plans on holding several informational hearings on KPERS issues during the current legislative session. Whether that will result in legislation to try to fix KPERS is uncertain at this time.

“I’m very encouraged by the enthusiasm of the members” in discussing KPERS issues, he said.

Any fix will cost money, which is something that the state is lacking.

In his departing comments, former Gov. Mark Parkinson lamented that he was unable to address problems with KPERS because of the state’s severe budget crunch.

“Hundreds of thousands of Kansans that serve our state will depend on KPERS to secure their retirement, and it is not funded properly. This is true for a variety of reasons, and they are all fixable,” Parkinson said.

“Unfortunately, part of the fix will require the state to provide additional funding. Another part of the fix will require people in the system to give a little more and accept a little less,” he said.

In his State of the State address last week, new Gov. Sam Brownback urged the Legislature “to work to ensure the integrity and soundness of the system for decades to come.” Senate President Stephen Morris, R-Hugoton, has appointed a special committee to work on KPERS, and assigned himself as chairman.

State pension systems across the nation are in similar situations, but a recent study by the Pew Center for the States said that KPERS was the second-worst under-funded in the nation.

During the 1990s, Deck said, KPERS routinely benefited from double-digit percentage gains through investments. He said that “masked” the problem of under-funding from the state.

Some states are considering adopting 401 (k)-style plans for new employees. Deck said he thought Kansas legislators would also study that.

Comments

gbulldog 3 years, 3 months ago

It is my understanding that the State of Nebraska tried a retirement experiment by offering a 401K or a defined benefit pension plan to Nebraska State employees. After several years, the State found that 401K retirees were sinificantly behind in their retirement funding. Now why is that? One of the reasons was that the investment practices were different. The 40K was managed by a person who had little or no knowledge of investment practicesor depended on finding someone to manage the money for them. Instead of funding KPERS properly, and providing the Legislator with a "much better" retirement than State employees, The Legislature, as well as many Corporations have failed to properly fund their pension plans.

When a State employee retires, the KPERS benefit is fixed. No matter what the inflation rate is, the retiree will not receive an increase in benefits, unless by special action by the Legislatiure. So when gas price jumped 25 cents a gallon today, State retirees face additional expenses without an increase in income, unless they have alternitive sources of income.

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William Weissbeck 3 years, 3 months ago

There is a major flaw in the 401(k) approach - one that is just as likely to blow up 20-30 years from now. The 401(k) model depends in large part on the exercise of personal responsibility by the individual worker. While personal responsibility is good in theory, it's pretty rough in practice. Too many people are simply saving far too little for their retirement, and/or investing in the wrong investments. The old defined benefit pension system depended on company profits and prudent investments. Companies abandoned these because they were costly, the companies were on the hook, and they realized that a certain number of workers even when offered a employer matching 401(k) alternative - would not contribute. Units of government don't generate profits to fund pensions - they are dependent on prudent investments and general growth in the economy. If those two fail - it's Katy bar the door. But always keep in mind, just like in Vegas - no matter what the bet, Wall Street never loses.

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jafs 3 years, 3 months ago

If bozo is correct, and I have no reason to think otherwise, then states will in fact be able to renege on their pension obligations, and not just for future hires.

And, in fact, on other threads, participants in this discussion have claimed that KPERS and other such plans are not in fact "promises" of benefits, and that employees are only entitled to the wages they earn.

It's very possible if the legislation is passed, that the state of KS will try to avoid living up to their end of pension obligations in a variety of ways, just as they've done with education funding.

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Starlight 3 years, 3 months ago

If the new administration cuts funds to education and my wife loses her job she'll have to start drawing her pension. Glad the "current benefits are safe for a period of time".

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weeslicket 3 years, 3 months ago

just wondering why i haven't heard from any of the "inviability of a contract" folks so far.

kpers is, whatever else you may think about it, a contractual obligation of this state to a qualified group of employees.

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coloradoan 3 years, 3 months ago

Newmedia -

The connection is that if the KPERS compensation is beneath that of other loacles, then it is hard to attrat the personnel who can elevate the the learning prospects of the students.

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LJ Whirled 3 years, 3 months ago

Best thing we can do for KPERS is to get the Kansas economy up and going ... a good place to start would be to get rid of regulations based on fake science or imaginary threats.

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yankeevet 3 years, 3 months ago

faggetaboutit............its only money...........

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pace 3 years, 3 months ago

The republicans underfunded the pension plan, they spent the money on special economic adventure plans The republicans underfunded the education programs, they spent the money investing in economic adventure plans. Now the economic adventurers have removed the capital from the projects and the economy has buckled under the strain of funneling money to economic plans. The economic plans that did not create economic generating infrastructure, too many withdrawals and no foundation poured. It is time. It is time to blame the liberals. Lets round up the 40 or 50 in the state and blame them while we regretfully have to renege on the pension and cut education we need to find some more money from somewhere (education, arts, health) we need to funnel more money to economic adventure plans. It is the liberals fault, they are the blame, we do not need to even look at the economic adventure plans and how they worked, That is not necessary. We need more liberals, there is a lot to blame the liberals for..

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jafs 3 years, 3 months ago

Perhaps one reason that people don't work for the same employer for that long anymore is that employers don't offer the incentives to do so, including pension plans.

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ksriver2010 3 years, 3 months ago

"working for one employer for 30 years is basically dead" Not at the state. Most employees are in it for the long haul, with many of them thinking it is the end-of-career job. New folks get smart and leave for the real world.

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solsken66 3 years, 3 months ago

From the information given, there must be increases through employee and state contributions to KPERS so that it will be solvent. Just kicking the can on down the street will not eliminate the the ever growing problem within the KPERS system.

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Alceste 3 years, 3 months ago

Glenn Deck and his cronies need to accept responsibility for their own parts in making poor investment choices. They guy is paid over $130,000.00 per year and the "investment team" are paid equally well.

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John_Brown 3 years, 3 months ago

Even the well funded public employee retirement funds in the country (Ill, New Jersey, California) are in trouble due to the state budget crunches. They are solvent now but are taking an ever increasing chunk of the state budget. I believe that the New York system alone needs a $20 billion increase in order to maintain its current obligations. Due to the fact these states are all operating under multi-billion $ annual deficits, polititians are going to be asked to maintain retiree benefits at the expense of current funds to provide for education. Watch how Govenor Christy in New Jersey is attacking this issue. Outside of the NEA/public employee unions, KPERS et al have no allies in state budget fights. They will lose.

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just_another_bozo_on_this_bus 3 years, 3 months ago

It's interesting that Wall Street banks' contractual obligations to pay out 7-figure bonuses to the folks who drove the economy into the ditch, taking KPER's and other pension funds' investments with it, are sacrosanct. But folks who quietly did their jobs under the promise of rather modest pay and retirement packages will likely be thrown under the bus by the "fiscal conservatives" looking for ways to please the Koch brothers.

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question4u 3 years, 3 months ago

The state pension system in Kansas is "the second-worst under-funded in the nation," but even more revealing is the fact that the same study shows that Kansas is one of only 8 states in the country that have under-funded. According to Kansas Reporter the state's elementary schools rank 37th in the nation, and the most recent USNews rankings listed Kansas high schools as 46th out of the 48 states that were reviewed. Whether you're proud of these statistics or not, couldn't these things have something to do with how Kansas is perceived by the rest of the nation?

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average 3 years, 3 months ago

Most Regent's school hires over the last decade have been unclassified/faculty, and thus have been in a 403 (401k-like) system for years, not KPERS.

It's the logical answer, since that's where the business world has gone, and the idea of working for one employer for 30 years is basically dead.

The problem is that the transition would be even more painful. The thousands of younger state employees paying in to KPERS right now are a major reason it can pay out to present retirees. If there stopped being new people contributing, they'd have to face the underfunding that much sooner. And legislatures are not into short-term pain.

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